A.M. Best Revises Outlook to Positive for Farmers and Mechanics Mutual Insurance Company of West Virginia

OLDWICK, N.J. --(Business Wire)--

A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of Farmers and Mechanics Mutual Insurance Company of West Virginia (Farmers) (Martinsburg, WV).

The ratings and revised outlook reflect Farmers' trend in above average operating results driven by its management's disciplined underwriting practices, generally conservative operating fundamentals and extensive local market knowledge, which has been evident over several years. Farmers' favorable earnings have been attributed to strong underwriting results complemented by a steady stream of investment income. The outlook further recognizes the expectation that the company's operating performance and capitalization will continue to benefit from management's judicious risk management practices, underwriting discipline, prudent reinsurance program and conservative investment strategy.

The ratings further acknowledge Farmers' solid risk-adjusted capitalization and strong pretax operating returns over the past several years, which have consistently outperformed the personal property composite average. The company's capital position is derived from below average underwriting leverage andconsistent generation of capital from profitable underwriting results combined with its conservative investment portfolio.

As a property predominant writer with a geographic concentration in West Virginia, Farmers' earnings remain susceptible to localized and severe weather-related events, as well as changes in the regulatory and competitive environments. Underwriting profitability remains a key objective of management, who remains focused on adequate pricing, an aggressive inspection program as part of its exposure management process and technology enhancements.

The ratings and outlook of Farmers and Mechanics Fire and Casualty Ins Co (Martinsburg, WV), a wholly owned subsidiary of Farmers' are unaffected by the revised outlook of Farmers.

Future positive rating actions may occur following continued strong underwriting and operating performance by Farmers, while maintaining strong capitalization. However, negative rating actions could result if the company's operating performance were to fall materially short of its expectations or if there is a considerable deterioration in its risk-adjusted capitalization.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Catastrophe Analysis in A.M. Best Ratings"; "Rating Members of Insurance Groups"; and "Understanding BCAR for Property/Casualty Insurers." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.